Am I crazy for my idea - yet another 'profitablity of a small, private station' threa

[Crazybry79]

Tell me if I'm on the right track here, or if I'm financially suicidal.

I'm looking to get into full power FM broadcasting.

I'm not an engineer, I'm not an electronics expert, BUT, I know just enough to be dangerous, and I'm armed with google and a hyper-strong will to learn.

Here's a touch of background. I live in the midwest. I want to purchase a smaller-ish full power FM station that's somewhere warm - down south.

Here's my plan: I want a fully automated station. No DJ's, No, news, No weather. Music and commercials. I plan on running my "broadcast" out of my current business (in the midwest), and sending my broadcast to my "warm weather" station (lets just say TX). I've located a station that I can purchase, every thing is there, MINUS the tower and antenna (those are no longer available). I plan on buying the land and rebuilding the tower, and having an antenna reinstalled with the transmitter and equipment right on site.

Operating the station will be a one man show. (I also own a car dealership, and in case you're not from the rust belt, rust free / southern automobiles are highly sought after - keep that in mind). Once a month, I plan on flying/driving to the broadcast area (TX), with several people tagging along. Once I arrive, purchase several cars, and send my "minions" back home with their rust free cars. I stay behind for a week, and run around and do advertising sales for the upcoming month (the month time frame is a guesstimate). When I'm finished, I come home (with another rust free car!)

Broadcast area has a population of around 80k-100k. Several smaller towns (3k), some ag, some tourism, one larger town of 50k.

Now, if you're not laughing and shaking your head already, keep reading.... Here's where it comes off the rails...

Cliff notes, I approached our local stations for advertising time (again, for my dealership). I was dumbfounded when I got my quotes back - on the small stations they wanted $1500 + /week for a handful of spots during the day, and a handful more at night. Big blowtorches were double that (Now, in their defense, we're a bit more densely populated here than my proposed station's area).

So here's my thought - My main goal is provide inexpensive advertising for the little guy. (The little guy is having a hard enough time competing against the evil empire(s) and amazon). I haven't done any market research in my target area, but why couldn't those numbers be shaved into 1/3rd of that if not more, and make it feasible for the little guy to advertise. Now, at the same time, once the station is up and rolling, I can start to inject local content. I can inject local (to the station)news, local weather, high school sports scores, ag reports, etc.

Don't get me wrong, I'm not expecting a 'get rich quick' thing here. I'm not expecting to start with nothing, and retire next week. However, I am expecting to make a little something on this endeavor, have it be self supporting, and provide me with a little fun in my dull boring life.

Thoughts? Am I nuts?

 

[TheBigA]

Thoughts? Am I nuts?

Everybody needs a hobby. You seem to have realistic expectations. Just don't mortgage the house.

 

[DavidEduardo]

Local and small town stations need a good local presence; this is part of doing relationship sales.

Local advertisers need constant contact with the station. They change copy with frequency and need to talk to management and there has to be someone to do production, sometimes instantly.

Any music format will exclude the majority of listeners, so one way of getting better local appeal is via local features including some news and, of course, high school sports.

Just playing music in the Internet world is no different than Pandora and inferior to Spotify and other on-demand services.

You have to be known and famous for something. A "ghost" station is not going to achieve that goal, and you won't sell anything.

b.turner who posts often here has considerable small market Texas experience and can tell you more. Hopefully you will hear from him.

 

[b-turner]

I read your post with delight. Part of me wants to scream no and part of me is all for it. I currently do sales in a small market. I have worked small town radio for many years with a quarter of a century managing a major market station for a local owner.

There are a few things I want to point out. You will need to get a contract engineer that will keep an eye on the station and run out there when something goes wrong. It will and nothing short of a physical visit to the site will fix it no matter the capabilities of remote equipment.

In sales, it's almost entirely direct business sales that are based on regular visits and building relationships. the typical sales takes at least 5 to 8 visits. Once a month and your competitors that are visiting weekly will take your slice of the pie. It's really hard to find good salespeople because they are already successful elsewhere. In fact, they likely have a history of a couple of years or more developing those relationships. From a mental state, it is much less stressful taking care of clients you know and that they trust than it is starting from scratch even if you matched their paycheck. Still, there are some always looking but really not that many.

Smaller market stations are usually successful by offering non-duplicated local programming. In other words, you get the listeners with info about the place they live and advertisers identify such stations as their primary trade area. This might be community announcements and weather to start. You need the right music format as well. It very well could be you are playing music you might not care for personally.

One thing you should realize is commercial rates vary greatly around the country. I have heard of smaller stations in some southern states selling $1 to $3 spots as it is the norm. I know of stations in towns of 40,000 fetching about $50 for a 60 sec. unit. A good bit of research might be to get spot rates from stations in the area. Then call a few big advertisers to ask what they pay. You might find it's half the rate card rate. I kid you not, I know of a very successful station charging $750 a month for a 30 second unit an hour 24/7. Their spot rate is $6. The rates in a certain area are pretty much a reflection of what the average business can afford and what value per dollar other media competitors offer. It is important to know what an average business spends on radio.

In my town, nobody would buy a $1,500 a week campaign. That's more of a monthly rate for a big client. At a station I managed, a client leasing the station was going to charge $750 a week for a half hour a day weekdays to local ministries. I knew nobody would buy at that rate. The best anybody got in this major market was about $1,750 a month versus his proposed $3,250. I informed the guy but he said he knew what he was doing. 90 days later he was moaning about not selling a single client and begging for a rate reduction.

Count on losing money for a couple of years. Count on a few bad hires that seemed to be a perfect fit for you. Even most salespeople need direction. I'm in a position where I don't have that support and I can understand how even a seasoned salesperson could have a tough time without direction. If I hadn't been in the same situation a few times, I likely would have been unsuccessful in my current position. I knew walking in, I had to make it happen myself and it would be a tough first year.

 

[Crazybry79]

I want to thank everyone for their replies!

I'm honestly blown away by the rates. I literally had to re-read that about 3 times to make sure I was reading it right! I rifled through my emails to try and find the rates I received from some of our larger stations without success. I did manage to find the rates from one of our smaller, may I say less popular stations. M-F 6a-7p was $18, 10a-3p Sat was $8, and Sun 10a-3p was $6. So unfortunately for me, I must be located in a 'honey hole' where I did my market sampling!

 

[b-turner]

Rates are sort of tricky. In one market I worked, the station was dominant. We literally had about 40% of radio listeners 12 to 49. Isolation was a big factor in this as there were few radio choices. It was a good sized small town of about 35,000. You could buy a full page newspaper ad for $400. Their circulation was about 7,000 at the time. The two other local stations did okay although we had a good 50% more listeners. The two stations charged about $2 and $3 a spot. We asked $4 and got it. By my estimation our station should have been in the $8 to $12 range. I asked why and the answer I got was that all the other media offerings available were priced at about 50% of what they were actually worth. I was told the average business was locally owned and simply would pay the rate. The general consensus was by being cheap we got the biggest slice of the advertising pie among the greatest number of businesses but if we doubled our rate well over 50% of those businesses would choose other stations and media.

I have to admit that was a real learning moment for me. Simply put, the station had found a sweet spot where the greatest number of businesses perceived the best value and bang for the buck. This literally went against everything I had been taught. I'd successfully used the line: "You're a businessman. If you can get $10 for a product, you have to deliver $10 in value. If my competitor is half my price, I have to produce double what they do. You bet they'd rather be asking $10 instead of $5 but they are priced accordingly, just like us. We know it's true. You get what you pay for and there is no free lunch."

I came away learning advertisers will spend about what they spend monthly on any local media. The rate can be influenced by the other media options in reach versus cost.

 

[Kelly A]

Thoughts? Am I nuts?

Yes, I believe you are. Regarding risk; chances of long term success with small market radio is right up there with opening a new restaurant. And just as with a restaurant, there are many variables. Many of which are out of your control, no matter how much of a super-salesman (or chef) you are.

Bottom line: The risks of failure far outweigh the chances of just breaking even. And this comes from someone who has worked in this industry my entire working life, including having owned, and sold, small market stations. bturner is always the ray of sunshine when folks have aspirations of becoming a small town media mogul. That's fine for him. Just remember..He's not the one putting his home or financial future on the line betting on your success.

 

[TheBigA]

Regarding risk; chances of long term success with small market radio is right up there with opening a new restaurant. And just as with a restaurant, there are many variables.

I always say if you combine a radio station with a restaurant, you have a better chance of making a profit selling food. Use the radio station as a gimmick and attraction.

 

[PTBoardOp94]

Everything about this seems reasonable enough, except for the commute back and forth between regions and not hiring any local staff.

If you wanted to run a local radio station out of your car dealership in your home town, that would probably be fine. I'm sure the car lot staff has a certain amount of down time when the flow of customers into the showroom is slow. You could probably run a decent local service with maybe one additional employee. But factor in hundreds or thousands of miles between the station staff and the station's service area and things become more unlikely to work out.

 

[TheBigA]

But factor in hundreds or thousands of miles between the station staff and the station's service area and things become more unlikely to work out.

Especially when the weather gets bad. All you need is a tornado or hurricane, and you're in trouble.

 

[SomeRadioGuy]

Everything about this seems reasonable enough, except for the commute back and forth between regions and not hiring any local staff.

If you wanted to run a local radio station out of your car dealership in your home town, that would probably be fine. I'm sure the car lot staff has a certain amount of down time when the flow of customers into the showroom is slow. You could probably run a decent local service with maybe one additional employee. But factor in hundreds or thousands of miles between the station staff and the station's service area and things become more unlikely to work out.

A guy in Repton/Evergreen, AL does just that. Has the studios in a building next to his car dealer.

 

[b-turner]

I'm not sure my post was 'sunny and positive'. In fact, I think it likely would not work.

There are so many variables. The town, competition, reputation the frequency has, the size of the market and just how good the competition is certainly factor in choosing a market.

For me, I'd say a small market station is the easiest to monetize. That money is based on relationships. Build relationships and give it a year to pay off. I must caution if you're not going to put in the hard work to be local and inclusive of the community, you'll likely be relegated to just those accounts that can't afford the market leader. In fact, you'd be lucky to just skim by.

You have to make a dime work like a dollar. You have to have people who can handle being fairly independent. For example, at one station I asked my owner about a promotional budget. He said to go look in the mirror. I was that budget.

There is so much that can be done online but you just can't replace look 'em in the eye and a handshake.

And needless to say, in radio, like any other business, you need a plan B, C and D if not more. Radio is like other businesses: it is to serve your customers (listeners), not your own whims. As for me I try to figure out plans where I can succeed and give little thought about how I can fail.

 

[bossbill]

I'll agree with Kelly A. Dreams can become nightmares. There's a long list of small market failures. It's not as easy as it appears.